After leaping 50% within the final six months, Greggs (LSE: GRG) shares seem like they’re again in traders’ good books. By comparability, the FTSE 250 index is up ‘solely’ 9%.
I can suppose of some the reason why this constructive momentum may stick round for the rest of 2026 and presumably into 2027.
What’s behind this robust restoration?
The preliminary catalyst for the restoration within the share value got here again in July. Along with reporting a 20% improve in first-half revenue, the market additionally cheered information that Greggs had seen stellar gross sales progress of its meals merchandise in supermarkets.
The corporate then added to this optimism in September with an encouraging replace. Whole gross sales rose 7.7% in Q3, with like-for-like gross sales up 3.4%.
This improved efficiency led administration to say that it anticipated “a modestly improved consequence for 2026“. Which may not sound all that nice, however keep in mind that traders had grow to be accustomed to being disenchanted.
Extra to return?
One motive for considering that Greggs might proceed rising is that we’re now in arguably a very powerful buying and selling interval of the 12 months for the corporate.
As buyers begin interested by Christmas, excessive streets will likely be busier than ordinary. That additional footfall, coupled with colder climate, might set the tills ringing extra continuously. Sensing this, some merchants might purchase the inventory prematurely of its subsequent replace on buying and selling (due 14 January).
Earlier funding is about to repay too. Two new distribution centres — in Derby and Kettering — will likely be opening quickly. Clearly, this may assist the corporate from an operational perspective. But it surely additionally implies that capital expenditure ought to fall after 2027.
On prime of this, the shares nonetheless look fairly valued for what stays a really high-quality firm and much-loved model. A price-to-earnings (P/E) ratio of 18 for 2026 continues to be method beneath the place it stood when Greggs got here near setting a brand new all-time excessive again in 2024 (excessive 20s) and I offered my stake. It’s additionally decrease than the five-year common P/E of 23.
Why may the shares lose momentum?
Certain, all these sights don’t mechanically translate to extra share value beneficial properties.
Whereas a visit to Greggs is unlikely to interrupt the financial institution, the cost-of-living disaster might nonetheless influence demand going ahead. Resurgent inflation additionally means prices are more likely to improve for the food-on-the-go retailer and will are available greater than anticipated.
Trying to the long run, there are additionally issues that the rising reputation of weight-loss medication will mood demand.
My verdict
I used to be initially cautious about whether or not Greggs would proceed to cost upwards a number of months again. In the course of a boiling scorching summer time, I puzzled simply how many people would fancy a steaming scorching pasty. However evidently the corporate’s evolving menu did sufficient to maintain folks coming by way of the doorways.
Whether or not this inventory will really break the £25 barrier inside a few months is, naturally, unattainable to say. Nobody is aware of for certain the place share costs are going within the close to time period.
Even so, I’m optimistic. For long-term traders, I believe Greggs is one of some progress shares positively value contemplating.
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Paul Summers has no place in any of the shares talked about.
